Defining Conflicts of Interest

2.1.1. Conflicting interests and CoI

In every day´s life, people have many roles and take many decisions that are conflictual, or even contradictory. As Ackerman notes (in Auby, Breen & & Perroud, 2014, 3), we live in an era where people are taking on ever more conflicting roles, identities, and changing loyalties. This cannot be avoided.

Also, in political life, leaders and politicians must take (often quick) decisions that are based on

“bounded rationality”, limited information and are taken before the background of various interests and value conflicts.⁵³

The concept of conflicts of interest refers to the risk that some of the many individual interests might conflict with the public and professional duties (David-Barrett, 2020). In fact, every day, people, politicians, civil servants and managers face difficult moral questions, moral conflicts and moral dilemmas (the latter as a situation where people must choose between two courses of action both of which it would be wrong to undertake). As we will see later, men involved in political activity⁵⁴ face specific (and sometimes very difficult) moral conflicts. Therefore, leading a moral life is not about choosing to live a moral life without moral conflicts and conflicts of interest. Rather it is about knowing how to deal with moral conflicts.

It is the nature of things to live with these conflicts and to manage them. In fact, balancing different interests is a core element of democracy, administration, and public officials. Therefore, everyday conflicting interests, values, and conflicting targets or objectives as such are not always conflicts of interest.

However, the change of governance and an increasingly commercialized public sector that works closely with the business, citizens and the non-governmental sector private sector gives rise to the potential of new forms of conflicting interests that may also lead to conflicts of interest between the individual public duties of officials and their private interests.⁵⁵

Governments and decision-makers react to these trends by broadening the definitions and concepts of conflicts of interest. In the meantime, ever more “grey issues” are emerging that can be neither defined as a clear (legal) conflict of interest, but rather conflicting interest which may also lead to a conflict of interest. A conflict of interest is related to a bias of personal judgment and personal decisions.

It relates to conflicts between primary and secondary interests and therefore goes beyond conflicts of interest which focus on conflicts between professional obligations and interests. In most cases, conflicting interests concern broader societal, political, economic, or cultural issues.

Take the following cases:

 While Art. 2 TEU refers to the Unions common values, the Treaty also requires the EU to respect the diversity of culture, traditions as well as national identities. This EU approach to ethics and values can be described as following conflicting objectives “united in diversity”⁵⁶ and may explain why the EU approach to ethics and values is relatively cautious and modest.

 Similarly, the achievement of an internal market is a key objective of the EU. Nonetheless, on an exceptional basis, Member States can restrict the free movement of goods based on grounds of public morality. Whereas the objective of the internal market is about the removal of “barriers”, the concept of ethics and morality is about the setting and maintenance of standards.

 While the EU is continuously criticised as being too distanced from local politics and citizens' interests and therefore should focus more on citizens and their concerns, it should nonetheless refrain from becoming a populist EU.

53De Graaf G., (2015), The Bright Future of Value Pluralism in Public Administration, in: Administration and Society, 2015, pp.

1-9.

54 Walzer, M., (1973), The Problem of Dirty Hands Philosophy & Public Affairs, Vol. 2, No. 2 (Winter, 1973), pp. 160-180.

55 OECD, (2003), 13.

56 Frischut, M., (2019), The Ethical Spirit of EU Law, Springer Open.

 Art. 45 TFEU allows for the free movement of workers within the European Union. However, the exception clause in Art. 45 4 TFEU makes an exception to employment in public administration and allows Member States to restrict the employment of certain positions – that exercise public powers – to nationals. Whereas some countries apply these provisions, others do not, or only to very minor positions. Still, some countries believe that non-nationals would be in a conflict of interest while exercising top-positions in another country and therefore, some positions should only be exercised to nationals. This is the case of loyalty conflicts. These types of conflicts are expanding. Take the case of a person who is moving from a Commissioner´s Cabinets or from the COREPER to the European Commission – will this move create a conflict of interest, or not? Are dividing loyalties possible while serving the national and the EU Interest at the same time?

 Or, take the case of a national Minister with double nationality and portfolio in the field of the other nationality. Will this create a conflict of interest? Note that former French Prime Minister Manuel Valls with dual French/Spanish nationality: Was he in a CoI representing French interests as a Prime Minister? Would he be in a CoI if he would be elected mayor of Barcelona and competing for receiving EU-social funds with the city of Paris?

 Or, again, take the case of a German civil servant with Turkish migration background negotiating on behalf of Germany in an EU-working group on migration issues with Turkey?

Or, the case of a French Police officer (born in Alger) who is working in the banlieues of Paris and called up to discipline migrants from Algeria. Is he/she in a CoI?

 What if a Minister and MP who is involved in a national decision-making process at the governmental level and the outcome of this very decision will negatively affect his local constituency – is he/she in a CoI?

 How to deal with the countless defeated former ministers or even presidents who enjoy different informal roles and post-political activities. For example, the puzzlement over the role of private foundations and philanthropic activities – take the cases of – Bill Clinton or Bill Gates inevitably raises questions about personal as well as the political influence of private (very affluent rich) persons and their influence on former colleagues and friends still in power.

 How to deal with alleged conflicts of interest of experts who participate in the European Commission´s Scientific Advice Mechanism (SAM). This mechanism should provide the Commission with high quality, timely, and independent advice. Scientific Advisors who work in SAM must have no conflicts of interest and declare all their interests. However, the mechanism regularly raises valid concerns about the independence of scientific experts (see also the Decision in the case 560/2019/KR of the European Ombudswoman on 30 March 2020).

However, it also raises the question of whether it is possible at all to completely avoid CoI within this process?

 European Commissioners and officials working in the European Commission are obliged to serve the European public interest. All of these have a European citizenship. However, all of them have also a national citizenship. More than 1000 officials and temporary staff in the European Commission even have double nationalities.⁵⁷ Does this lead to loyalty conflicts amongst different European- and national loyalties while carrying out professional duties?

As these cases show, the problem with the concept of conflicts of interest is that it is difficult to separate and to distinguish from the concept of conflicting interests.

57 According to the European Commission, (2018).

Whereas an office holder not necessarily commits a CoI if he/she finds him/herself in a conflicting situation, a conflicting interest nonetheless may lead to a conflict of interest. Today, both concepts overlap, and both are dynamic. As we will see, this leads to an expansion and inflation of the classical concept of conflicts of interest, as presented at the beginning of this chapter. This again has a dramatic impact on the effectiveness of CoI policies. Overall, this challenge is, not yet, sufficiently recognized by decision-makers and academics.

2.1.2. Defining Conflicts of Interest (CoI)

Conflict of Interest policies are “individualised” policies. They relate to individuals and intrapersonal conflicts. Conflict is a state of mind of a person. Because of this, it can hardly be proved whether a Minister or top-official has been conflicted or whether the CoI had an impact on the decision taken by the person. CoI rules and policies could easily be justified if it could be proved that a conflicted state of mind has led to conflicting consequences. However, this is not possible.

Therefore, CoI tackles not only the conflict but also the appearance and prevention of conflicts.

However, real CoI can hardly be measured. Regulating CoI is not a straightforward concept. People implicitly belief that the conflict will distort the person´s decision. We also expect that the person should recognize the conflict and shield their own decision-making from improper influence. Deciding and realizing when an apparent conflict may lead into inappropriate decision-making is difficult. As such, it is only the person in question who knows about its own interests and potential conflicts (David-Barrett, 2020).

Often, Ministers and top-officials esteem too highly their ability to deal with their own CoI. They also overestimate their capacity to deal in a conscious and impartial way with their own CoI. Because of this, innovative approaches in the field of CoI policies and rules are badly needed.

In daily life, multiple conflicting interests may pull people in different directions but only when they compromise professional obligations is there a conflict of interest. Compromising professional obligations may then lead to corruption, but a CoI is not necessarily corruption.

Therefore, when defining CoI, many authors refer to a definition of CoI that goes beyond the term corruption.

“A 'conflict of interest' involves a conflict between the public duty and private interests of a public official, in which the public official has private-capacity interests which could improperly influence the performance of their official duties and responsibilities”⁵⁸

As we will see, defining CoI is no easy task. The concept as such functions as an umbrella that incorporates all sorts of tensions between official and private roles.

Moreover, the relationship between CoI and conflicting interests is not clear, as both concepts overlap and influence each other. Increasingly, conflicting interests are also defined as CoI.

This trend poses not only challenges to the definition of CoI and to the concept of CoI. Rather, this trend also contributes to new very practical implementation challenges in the field.

Differently to CoI, conflicting interests are everywhere. Thus, whereas conflicting interests emerge in all sorts of daily life situations, a conflict of interest is always related to professional life and work-related issues.

58 OECD, (2003).

Since the field of conflict of interests has been dominated by legal approaches for many decades, there is great insecurity about the need for alternative instruments, the right regulatory mix, the role of self-regulation, the effectiveness of incentives, the definition of good governance in the field and the relationship of classical legal instruments to other political, psychological and economical approaches, etc.

Thus, for sure, conflict of interest requires interdisciplinary cooperation because it is a borderline concept in the intersection of law, politics, economy, sociology, organisational behaviour and morality.

As we will see in this study, increasingly, different disciplines are engaged in studying conflicts of interest. However, this situatedness immediately also raises the deep question of the limits of the law and compliance-based approaches. Still, despite its fashionable character, we are also critical whether new behavioural instruments should replace legalistic approaches. In fact, it is true that the context of any conflict of interest is the personal (psychological) and institutional environment. But this, again, is influenced by the legal-, political-, cultural and economic context. These different systems (the political system, public administration, the economic system, the legal system, science, religion etc.) function based on different values and each system develops towards ever more differentiation. Each area of study is defined by its own set of paradigms, theoretical concepts, research methodologies, and scholarly journals and book series”.⁵⁹

Therefore, according to legal doctrines, a conflict of interest arises only whenever activities, decisions, or relationships compromise the loyalty or independent judgment of workers, civil servants, or holder of public office. And not of citizens in ordinary life.

Therefore, CoI may result in an abuse of public office for private advantage and holds the potential for unfair behaviour.

Figure 8: Conflicts of Interest, Institutional, and Personal Level

Note in this respect that the well-known OECD definition “A conflict of interest involves a conflict between the public duty and private interests of a public official, in which the public official has private-capacity interests which could improperly influence the performance of their official duties and responsibilities”⁶⁰ only addresses conflicts in the professional-private domain.

59 Andersson, S. & Anechiarico, F., (2014), The Political economy of conflicts of interest in an era of public-private governance, in: Paul M. Heywood (editor) (2014), Routledge Handbook of Political Corruption, Routledge Handbooks, New York, 65.

60OECD, (2003), 4.

Another important difference to the concept of conflicting interests is the concept of Conflict of interest is a legal concept.

CoI as a legal concept has a long agreed-upon meaning in law used to regulate fiduciaries – individuals entrusted to serve the interest of another party or to serve a designated mission – who are held to the highest legal standards of conduct. Generally, these laws and codes do not permit fiduciaries to promote their own interests or the interests of third parties. Instead, they require fiduciaries to be loyal to the party they serve, to act prudently and diligently, and to account for their conduct. To advance these goals the law regulates certain situations – designated as conflicts of interest – that increase the risk that fiduciaries will betray their trust. It often prohibits fiduciaries from entering into situations that create conflicts or require that they cease the activity that creates a conflict or that they disclose their financial interests so that third parties can identify and manage the conflict and thereby reduce the risk of misconduct⁶¹.”

Thus, from a legal point of view, a conflict of interest can be defined as a conflict between the private interests and the official or professional responsibilities of a person in a position of trust, or an actual or potential conflict arising when a person holds a private interest that conflicts with the one of his/her employer; persons in a “conflict of interest” whenever they themselves, or members of their family, business partners or close personal associates, may personally benefit either directly or indirectly, financially or otherwise, from their position on the Board.

Next, a CoI is always a psychological state of mind. In most cases, we do not know whether a person has a CoI and acts accordingly. However, we can judge whether a CoI can be perceived, whether there exists a potential or actual conflict of interest.

For example, the actual conflict of interest is different from an apparent conflict of interest: “...where it appears that a public official’s private interests could improperly influence the performance of their duties but this is not, in fact, the case”, and a potential conflict of interest: “where a public official has private interests which are such that a conflict of interest would arise if the official were to become involved in relevant (i.e. conflicting) official responsibilities in the future”.⁶²

Table 2: Actual, Potential and Perceived Conflict of Interest

Still, as a holder of public office, a person of trust acts in the public trust for millions of people. People should indeed not guess whether decisions taken by powerful persons are decided because of private-, or because of public interests. Thereforeprivate-, it is important to avoid even the appearance of a CoI. Most CoI take a preventive character.

61 Rodwin, M., (1993), Medicine, money and morals: Physicians Conflicts of Interest. New Zork: Oxford University Press, pp. 179–

210; Rodwin, M., (2018), Attempts to redefine conflicts of interest, Accountability in Research, Vol. 25, No. 2, pp. 67.

62 OECD, (2003).

Next, CoI may arise in many different situations, or as regards many different issues. Thus, CoI can be further classified. For example, whereas in the past CoI policies almost exclusively focused on nepotism and financial interests, later on, CoI were classified into two very broad types: pecuniary and non-pecuniary CoI.

• Pecuniary interests involve situations of financial profit or financial problems. People have a pecuniary interest if they (or a relative or another close associate) own property, hold shares, have a position in a company bidding for government work, or receive benefits (such as concessions, discounts, gifts or hospitality) from a particular source.

• Non-pecuniary interests do not have a financial component. They may arise from personal-, political-, ideological- or family relationships, or other activities. They include any tendency towards a personal favour or prejudice resulting from citizenship, friendship, animosity, or other personal involvement with another person, party, institution, or country.

Also, different CoI may produce different types of behavior, which result in

1. Corruption of officials through bribery, kickbacks, office-buying: Financial interests can affect an official and affect his behaviour/judgment, duties, values, work, motivation, and performance

2. Self-Dealing: One official – one interest. A CoI may affect an office holder in the office role because of a motivation to act in his/her personal interest. Involves a single official with an interest he/she possesses that can affect his job.

3. Undue Influence: Involves two officials and one interest. A CoI may cause an undue interest. An undue interest involves one person taking advantage of a position of power over another person. This inequity in power between the parties can force one party's consent as it is unable to freely exercise its independent will.

4. Abuse of Office. Involves one official and two private interests. A CoI may cause abuse of Office.

Abuse of office is the commission of an unlawful and unethical act, done in an official capacity and as the result of power, information, or resources, which affects the performance of official duties. Officials who utilize abuse of power are often those who exploit the ability of their position, status, information, or resources to influence others to their advantage.

5. Private gain for public acts: A CoI holder has the capacity to affect the interests of a private party that transfers value to an office-holder. The official receives a value in his personal capacity as a result of his public decision.

6. Private gain from public office: This CoI refers to situations where officials draw on knowledge skills, experience, stature, or prestige derived from their public office to reap some form of private gain.

All these forms may be a result of intentional CoI but also unintentional CoI. Not all violators of conflicts of interest rules and policies are simply uncaring, evil people. We will come back to this.

In document The Effectiveness of Conflict of Interest Policies in the EU-Member States (sivua 35-41)